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Ittel v. Pietig11/1/2005
Homeowners Terry and Gina Ittel appeal from the district court's summary judgment dismissing their claims for defective construction against a vendor-contractor and its subcontractors. The Ittels acknowledge that a previous settlement agreement's general-release provisions bar the breach-of-contract and consumer-fraud claims, and we affirm the dismissal of those claims. But, because the settlement agreement is subject to the statutory new-home warranties in Minn. Stat. § 327A.04 (2004), and the release does not effectively waive or modify the warranties, we reverse and remand.
FACTS
In November 1999 Terry and Gina Ittel purchased a home newly constructed by Pietig Bros., Inc. (Pietig). In the four years following the purchase, the Ittels encountered a series of construction problems that fostered three lawsuits. They first sued Pietig in 2001 for water damage to their basement caused by a defective sump pump, inadequate grading, and improper landscaping. Pietig and the Ittels arbitrated the dispute, and the arbitrator determined that the Ittels were entitled to approximately $14,000 in damages.
While repairing these defects, the Ittels discovered that the interior drain tile was improperly installed and the house had no exterior drain tile. In 2002 the Ittels sued Pietig for repair costs to cure the drain-tile defects. The Ittels and Pietig resolved this litigation through settlement. The settlement agreement required Pietig to pay the Ittels $5,375 as "a complete and final settlement and compromise of all claims" and stated that this payment was in full accord and satisfaction of all claims by the Ittels against Pietig. The agreement included a general release for all current or future claims that the Ittels might have against Pietig:
In consideration of the above-referenced amounts paid by Pietig, Ittels . . . do hereby release and forever discharge Pietig . . . from any and all actions, causes of action, claims, demands, damages, costs, or expenses of whatever kind and nature, whether known or unknown, suspected or unsuspected, which Ittels now have or may have against Pietig.
The settlement agreement included no substitute or alternative warranties.
In the fall of 2003, the Ittels sustained damage from water intrusion in the front of the house. The Ittels determined that the water intrusion resulted from the improper design or application of the stucco exterior, the absence of kick-out flashing from the roof to the wall, and related defects. According to the building inspector, these defects violated city building codes.
In this third suit against Pietig, for water-intrusion damages caused by major structural defects, the Ittels allege breach of contract, breach of warranty, and consumer fraud. Pietig filed a third-party complaint against its subcontractors, alleging claims of contribution and indemnity. In its answer to the Ittels' complaint, Pietig asserted that the settlement agreement in the second litigation with the Ittels bars the action. Joined by two subcontractors, Pietig then moved for summary judgment. The Ittels, in response, argued that any agreement to release future claims for breach of statutory new-home warranties is void as a matter of law under Minn. Stat. § 327A.04 (2004).
The district court concluded that the general-release provisions in the settlement agreement preclude the Ittels' claims against Pietig, that the policy considerations supporting litigation settlements outweigh the policy considerations supporting new-home construction warranties, and that the legislature could not reasonably have intended to apply the statutory restrictions on waiver to settlement agreemen
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